It's only $250 difference and I feel like the 27" gives me a lot of room to expand, but I'm not 100% convinced I need the screen real estate of the 27" (especially coming from a 17").

My workflow is pretty simple: MS Office for Mac, Web Surfing, minor Photo Editing (Photoshop Elements now, but likely moving to Aperture), minor home video editing, iTunes Library. I will likely use this as a hub for all of our media and stream much of it to iPad & Apple TV.

If a bigger screen isn't that to important to you the 21" would probably be fine for you. In terms of what's inside, one should always get the maximum "power" ,ie memory , storage ,chip speed etc. ,that one can afford.
I myself got the 27" because I like it for my photography and design work.